Karnataka Bank conducted a conference call on 03 February 2023 to discuss its financial results for the quarter ended December 2022. Mahabaleshwara MS, MD and CEO of the bank addressed the call:

Highlights:

The performance of the bank has been consistent and the aim of becoming a vibrant bank is becoming visible.

The bank has improved asset quality with the reduction in GNPA ratio to 3.28% and NNPA ratio has also declined to 1.68% end December 2022.

The advances have increased by 13%, while the bank has improved Casa ratio to 31.9% from 31.3% last year.

The asset level of the bank has crossed Rs 1 lakh crore mark end December 2022.

Net interest margin has improved to 3.81% from 3.16% in the same quarter last year.

The bank has improved return on assets to 1.1% in Q3 from 0.65% in Q3 last year.

PCR has further improved to 80.1% from 73.66% last year.

The capital adequacy ratio stood at 15.13% from 14.15% last year. Including profits for 9 month, the capital adequacy ratio stands at 16.57% end December 2022

The bank expects net interest margin to be at 3.5% for FY2023. The yield on advances has jumped to 9.45% from 8.81% last year, while the cost of deposits has remained lower at 4.54% from 4.65% last year.

The bank has provided Rs 94 crore for securities receipt book in Q3FY23 in line with the RBI guidelines and fully absorbed the impact in the current quarter which has impacted the treasury income segment of the bank.

The provisioning were also higher in Q3FY23 on account of accelerated provisioning for raising PCR

The bank is focused on creating adequate provisions before coming to the bottom line.

The bank expects slippage rate to be lower in the range of 2.5-2.9% for FY2023. The slippage rate stood at 2.25% in 9MFY2023 compared to 3.1% in FY2022.

The credit cost stood at 0.9% in 9MFY23 compared with 1.04% in FY22. The bank expects credit cost for FY23 at a similar level to FY22.

The bank has created good ground for reducing credit cost to 0.5-1% for FY2024.

About 60% of the loan book of the bank is linked to the external benchmark linked landing rate and the bank aims to have an impressive net interest margin going forward.

The bank expects to achieve more than 15% loan growth for FY2023.

The bank aims to grow above the industry growth in FY2024.

The bank has raised digital underwriting of retail loans to 75%

The bank had targeted RoA of 0.9-1% for FY23, while it is already above the target at 1.14% in 9MFY23 and the aim is to keep it above 1% for FY2023.

The bank expects its performance to be sustainable. As per the bank, its cost to income ratio is on a graduate downward journey.

None of the accounts in the slippage for the current quarter was above Rs 40 crore.

The bank gold loan book stands at 5% and aims to raise the share of gold loans to 10% in next 2 years which would be supportive to margin and yield on advances

The IT spends of the bank stands at Rs 80 to 100 crore per year.

Bank expects the CASA ratio to cross 35% in the next couple of years.